I understand that skiplagging is finding a flight that is cheaper to go from point A, to B, with a planned trip to C, but just leaving the airport at B.
I don’t understand the basic concept of how this happens though. How is a flight from A-B-C, ever cheaper than a flight just A-B? The extra cost of the C leg would have to be entirely absorbed by the savings from A-B, how is that possible?
In: 23
The key point is that the price of anything is not set by the cost to provide that thing, but the amount people are willing to pay for that thing. If an airline has a bunch of planes flying a bunch of routes, it prices the seats on them in order to get the maximum amount of revenue. It doesn’t suddenly decide “oh wait, that route is shorter so uses less fuel so we’ll discount it, even though people are still buying tickets at the higher price”.
Imagine you have made a bunch of lemonade and filled up your fridge with it, in anticipation of a hot day. At one end of your street, which is like a mile long, there is a big construction project with workers constantly going on and off break, and at the other there is a funfair with a bunch of families. You set up a stand at each end of your street, and pay some of your young cousins 10 cents a glass to man each stand and sell it. You pay another cousin to skate jugs of lemonade from your fridge to the stands, but he asks for 5 cents a glass to take it to the funfair end, and 10 cents to take it to the construction site end as it’s further away. It also cost you 10 cents a glass in ingredients, plastic cups and fridge electricity – so the cost to sell a glass at the funfair end is 25 cents, and at the construction site end it’s 30 cents. You need to sell all your lemonade today because you’re about to leave on vacation for a week, and there’s only room for one stand at each end of the street. How do you price your lemonade?
The answer is: you see what people will pay for it. You can entice a steady but not overwhelming stream of construction workers over to your stand – just enough to keep your cousins moderately busy – by pricing it at 40 cents a glass. However, when you make it 40 cents a glass at the funfair end you get mobbed by kids demanding their parents get them a glass, so you decide to raise the price to 60 cents, which reduces the pressure a little bit. Even though it’s easier for you to provide it there, that’s an irrelevance, as people are willing to pay more.
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